Delays eat into $50m sports centre savings

Delays eat into $50 million in savings trimmed from a Christchurch sports centre’s budget, David Williams reports.

Time is money, they say. It makes sense, then, that time spent trying to save money can be costly. So it has proved for Christchurch’s 30,000 square metre metro sports facility, one of the quake-hit city’s long-awaited anchor projects.

In November 2017, Christchurch Rebuild Minister Megan Woods stood at the large gravel site near the city’s hospital where the centre is supposed to be built. She announced the early contract with the facility’s preferred contractor was being torn up.

She blamed a $75 million “cost blowout” - to $321 million - on the design and build contract, and ordered officials to re-think the design to save money - including exploring the idea of putting the city’s yet-to-be-built stadium on the same site. That idea was scrapped but about $50 million in savings were found, we’re told.

Except that won’t all be realised – and the overall project figure is in the ballpark of the original “blown out” total.

Last month, Crown rebuild agency Ōtākaro announced it had awarded a $221 million build contract to CPB Contractors Ltd, the massive Australian company building the city’s convention centre and hospital acute services building. The project’s total cost is now $301 million – only $20 million shy of Woods’ “blowout”.

Beyond the build contract, $30 million has been spent on technical expertise, design, legal and project management services. By the end of next month, $17 million will have been spent on land remediation – with March Menard JV driving 7200 stone columns into the ground. Another $33 million has been set aside for specialist equipment like pool tanks, hydroslides, and water toys, as well as fixtures and fittings.

(Land acquisition costs of $58.4 million aren’t included in the budget costs. Woods’ office confirms there’s a confidential land exchange agreement with the Canterbury District Health Board to provide land being used as a car park.)

Woods says the $17 million for land remediation would have been spent anyway. But, even putting that aside, the $301 million total still means a “blowout”, using the Minister’s lingo, of $38 million.

In a statement, the minister says: “The costs involved are frustrating but unavoidable. The effort to get the site ready for construction has been considerable and challenging, with significant amounts of contaminated material requiring removal and stone columns needing to be installed to solidify the ground, to ensure it is not prone to liquefaction in the event of an earthquake.”

Function over form

The facility will be the largest of its kind in New Zealand. It’ll have a 50-metre competition swimming pool, with 1000 spectator seats, and a 20m x 25m diving pool. The leisure facility will have five hydroslides. There’ll be up to nine multi-purpose indoor courts, with seats for up to 2500 spectators in the show court.

(Costs to the Christchurch City Council, which will own and operate the centre, are capped at $148 million.)

Last year, officials consulted sporting codes over the design. Function was favoured over form, Woods says, with savings being found through using more affordable finishes, inside and outside the building, and removing architectural features like the entrance canopy and skylights.

“Given we’ve seen other costs emerge, the total bill would have been much higher if we hadn’t cut our cloth and made those common sense changes.”

Nicky Wagner, the National Party spokeswoman for the Christchurch rebuild, says she suspects if the Government had pushed go on the contract in place during her party’s tenure it would have got “more for the same amount of money.”

“The amount of time that they took mucking around, looking at it, cutting it back, blah-blah-blah-blah-blah, just exacerbated the problem.

“We all know that time is money. There’s been almost a year lag in time.”

Wagner excoriates the Government for the perceived lack of progress. However, land remediation work at the site has been happening since August last year. And while construction costs are rising – by double-digit amounts in some fast-growing places – some of the rising costs can be put down to risk.

“What we would like to see ... is structuring your contract so that New Zealand contractors have a reasonable opportunity to win the work.” – David Kelly

After the early contract with Leighs Cockram Joint Venture Ltd was torn up in 2017, Ōtākaro completed the design work, rather than pursuing the initial design-and-build arrangement. That took some risk out of the project.

Ōtākaro refuses to comment on the configuration of the build-only contract with CPB, and where the risks lie. But it’s thought that, unlike the original arrangement, the contractor has taken on more risk – which would account for some of the increased price.

Leighs Construction chief financial officer, David Jarman, tells Newsroom that the design hadn’t been completed in the early phase of the metro sports project – and completing that does limit risks to the construction contractor.

Despite Leighs being involved early in the project as the preferred contractor, Jarman confirms it didn’t tender for the build-only contract. “It was around six months or so, or longer, before they put it back out to tender and by that time we were working away on other projects and had a reasonable amount of work on.”

The construction industry is under pressure. NZX-listed Fletcher Building lost hundreds of millions of dollars, including on Christchurch’s justice precinct. Ebert Construction went under last year and, in February, Arrow International crashed into voluntary administration. Beneath the surface, generally out of the public eye, tradespeople and subcontractors have had to wear losses and, inevitably, some have gone out of business.

Give Kiwis a fair crack

Construction Industry Council chair David Kelly, the chief executive of Master Builders, says that reduced capacity and capability has forced up prices. It’s no surprise to him that an Australian firm won the metro sports contract.

“What we would like to see, and again that’s part of the discussion with Government, is structuring your contract so that New Zealand contractors have a reasonable opportunity to win the work. It’s not favouring New Zealand construction companies, in terms of we’ll give the work to you before anyone else, but it’s structuring the contract so they have a fair crack at it.”

Kelly says there’s evidence to suggest some contractors are pushing back to clients over risk, he says. In some cases companies are not bidding for contracts they see as too risky.

More work is being done on scope and design of projects before clients go out to tender. “That probably makes for a better result for everyone,” Kelly says. And construction firms are pricing jobs better to factor in risks.

But problems persist. It’s not just the Government trying to offload risks, he says. It’s also true in local government, and he’s seen some “unreasonable” private sector contracts.

“It’s starting to improve but we’re not there yet.”

The metro sports site is bounded by Moorhouse Ave, Antigua and St Asaph Sts, on an established cycle route, and near the city’s bus exchange. Construction should start next month. When it’s completed, in late 2021 according to the latest schedule, it’s expected to have 40,000 people through its doors each week.

Minister Woods reckons it’ll attract national and international events. “The long-term additional spending these events bring to the city means continuing with the project on this site was the right decision.”

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